From Texas, I mostly cover the energy industry and the tycoons who control it. I joined Forbes in 1999 and moved from New York to Houston in 2004. The subjects of my Forbes cover stories have included T. Boone Pickens, Harold Hamm, Aubrey McClendon, Michael Dell, Ross Perot, Exxon, Chevron, Saudi Aramco and more. Follow me on twitter @chrishelman.

Which Companies Pay The Most In Taxes?

And income taxes isn’t even the half of it–literally. Exxon also recorded more than $70 billion last year in sales taxes ($33.5 billion) and other taxes and duties ($43.5 billion). But none of that will matter to the president if gasoline prices keep climbing. Having been blocked on his Big Oil tax hike, don’t be surprised if in the heat of the summer driving season he calls for a windfall profits tax on oil companies. The very concept implies that the companies are earning an unfairly high return. Sure Exxon’s and Chevron’s net incomes are high. But so are their revenues! Exxon’s revenues were $486 billion and Chevron’s were $254 billion. That implies an average net margin of just 10%.

Compare that with the $33 billion that Apple made in 2011 on $128 billion in revenues and Microsoft’s $23 billion income on $72 billion in sales. Those margins are 26% and 32%. And yet Apple enjoyed a low effective tax rate of 25% and paid a relatively meager $4 billion in income taxes, putting it in ninth place on our list of the biggest U.S. corporate taxpayers, while Microsoft had an effective rate of just 16% and paid $5.3 billion, placing it sixth. So why doesn’t President Obama propose a windfall tax on Apple and go after its $100 billion cash hoard?

What’s sad is that, in a sense, he has. (And we’re not just talking about the federal antitrust lawsuit against Apple for collusion on e-book pricing.) In February the president released his a business tax reform plan that calls for reducing the statutory corporate rate to 28% but getting rid of a bunch of loopholes and breaks that according to analysts would effectively raise the rate back up to 33%.

And far from making the tax code fairer, the president’s plan calls for the creation of even lower rates for manufacturers and lower still for companies engaged in “advanced manufacturing.” It would cut those “loopholes and subsidies” on Big Oil while retaining subsidies for greener energy developers.

Prof. Slemrod says tax policy works better when it doesn’t play favorites. He suggests cutting the domestic manufacturing tax credit entirely (and not just for oil companies, like the president proposes). Though some manufacturers would complain, cutting the credit would simplify tax reporting and generate roughly $20 billion more in tax revenue. Martin Sullivan, chief economist at Tax Analysts, suggests that the U.S. ought to create a new value-added-tax on consumption, which he insists is not as regressive against low-income families as commonly thought.

What to think about the hallmark of the president’s plan: a proposed “corporate minimum tax” on global profits? This is a tax that would chase U.S. multinationals all around the world, and if the local authorities aren’t charging a high enough tax rate (like in Ireland, where the rate is just 12.5%), the president would tack on extra tax to bring the company’s tax burden up to the U.S. level.

This could trigger a huge shift in business strategy. Pharmaceutical and software giants are renowned for setting up subsidiaries in low-tax countries like Ireland then transferring ownership of patents and other intellectual property to those subs. That way, when they get paid fees and royalties on licenses, the high-margin profits are recognized and taxed in Ireland instead of the U.S. Only if they bring the profits back to the U.S. do they face U.S. taxes, so they don’t. Avoiding the 35% U.S. tax rate automatically saves the companies 22.5 cents on every dollar of pre-tax income. A new global tax would seek to end that offshoring practice. But would it?

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This was a fantastic article and I like that you added suggestions. However, at one point you compare the tax status of pharmaceutical and oil companies, then ask “why single them out?” In this case, the effort to focus on oil companies has to do with the environmental costs of their business. We seek to “single out” oil companies because of the long term costs being created for future generations (peak oil will be a problem even sooner than the impacts of climate change). That is not to say that pharmaceutical companies are any better, there are certainly long-term problems associated with over-prescribing, as well as the social lethargy such a thing promotes.

“In this case, the effort to focus on oil companies has to do with the environmental costs of their business.”

In that case, what you want to do then is directly increase the tax on the consumption of the production. By going after tax breaks, all you really do is shift the advantage to foreign producers that gain a competitive advantage because we are punishing our domestic companies. If you simply raise the price of gasoline you keep the playing field level. (This can be done without increasing the overall tax burden by lowering other taxes at the same time).

In reading the data on the Megacorps and Megataxes, I noticed the huge gap between their Net income and their Gross income. That prompted me to realize that the gap between those numbers (Gross – Net) must be their allowable business deductions, so I set up a spreadsheet to add some value to the data you supplied. I created a column for the amount of Deductions; then I created a column that calculated the Percent of Tax as a Percent of their Gross. Then I created a column that calculated the Deductions as a Percent of their Gross. Only three of the 25 corporations paid more than 10% of their Gross in Taxes; some were under 2% of their Gross. On the Deductions side of the data, most were able to claim more than 75% of their Gross as Deductions. How many citizen taxpayers get to deduct more than 75% (as much as 96%) of our gross income? (I deducted 13.3% of my gross on my 1040.) How many citizen taxpayers get to pay less than 10% of our gross in taxes? (I paid 23.5% of my gross.)

I was unable to copy/paste the spreadsheet here and keep the formatting. The following data may wrap around in the available space.

You raise a great point Lanis – corporations get to deduct so many of their operating costs, yet citizens do not. Do you think a flat tax on corporations and people would make a difference? In other words, simply rescind all deductions?

Really theses energy giants are the rulers in tax paying and the government not only in U.S but also in other countries as well listen to these energy giants when designing a new energy policy just because of the Taxe$ they pay.biomass energy

The one thing that jumps out at me from your article is that the opinions about paying too little tax are NOT based on any reality. The use of the pejorative phrase “fat cats” is really telling. It’s as though large corporations that make a lot of money must be evil and their wealth is prima facie evidence of their evilness. WRONG!

To be sure, evil can be found in large corporations, but that’s because there are evil people in large corporations. But then there are evil people everywhere, from the richest to the poorest. Neither wealth nor poverty is a mark by which we can identify evilness. Evilness identifies itself. But I believe that the real evil is people, out of their envy and covetousness and their desire to feel morally superior, engaging in the subterfuge of alleging this connection between wealth and evilness.

It’s like the ancient scribes and Pharisees, to whom Jesus said, “27. Woe unto you, scribes and Pharisees, hypocrites! for ye are like unto whited sepulchres, which indeed appear beautiful outward, but are within full of dead men’s bones, and of all uncleanness. 28. Even so ye also outwardly appear righteous unto men, but within ye are full of hypocrisy and iniquity.” (Matthew 23:27-28).

An important fact that was not mentioned is that more than 70% of ExxonMobil’s profits come from outside the United States and most of the profit in general comes from the Upstream (Exploration and Production). Furthermore, one seldom sees a ranking of the Oil companies that includes the NOC’s National Oil Companies (state owned such as Saudia Arabia). See http://www.petrostrategies.org/Links/worlds_largest_oil_and_gas_companies_2012.jpg for a big surprise on where ExxonMobil lands on a list that includes the NOC’s. The Oil and Gas industry is truly a global industry. It makes no sense for the U.S. to burden the oil industry with additional taxation. This will only lead to lower U.S. production and increased dependency on the NOC’s and could lead to U.S. companies leaving the U.S.

If you want to believe Forbes, you have to read closely. ExxonMobil paid a 13% tax on it’s U.S. profits. The company’s high overall tax rate was because it paid rates of as high as 70% in other countries. So Forbes wants to pin the tail of the high overall tax rate on the U.S. Government??

Christopher – are you paid off by big oil to write this article, because the fact is, Big Oil paid much less in taxes, after their write-offs, etc. From you local hometown paper: http://www.bizjournals.com/houston/news/2012/08/06/conocophillips-exxon-chevron-paid.html?page=all Its not that Profits are bad to we “nasty Democrats”. Its that Corporations dont pay their fair share of the burden and it’s on the backs of the poor and middle class to make up the difference. Right now, US companies are sitting on piles of cash, yet they wont hire, and they wont invest in America. US Corporations pay some of the LOWEST in US Taxes; and many of them have their headquarters here in Texas so they can: 1) Pay no State Income Tax; and 2) employees can be fired for no reason, with no just cause.

huh? you’re comparing apples and oranges. the article you reference only looks at taxes paid to the u.s. federal government, not all taxes. oil companies pay massive taxes on income around the world. u.s. tax law stipulates that they get to deduct those amounts from the u.s. federal taxes due. otherwise they would be taxed twice on the same income. real my article again.

I believe it is you who are comparing apples and oranges when you compare foreign “taxes” with US taxes. Many of the foreign “taxes” or royalties are in fact the cost of doing business. Your article refers to the unreasonable 70% Exxon has to pay in Angola. It’s their oil Chris. A 70% extraction fee is quite reasonable. To then let the companies call those payments taxes and use them as credits instead of deductions is a terrible tax loophole and would be like letting a large meat processor use the cost of buying cattle as a credit instead of a business cost. If the percentage of business costs, such as royalties royalties, are higher than the tax rate it then becomes possible to avoid all US taxes. Its a scam and you are a spokesman for it.

The last time the nation’s tax code was overhauled, in 1986, Congress tried to end a big corporate giveaway. That year Ronald Reagan wanted to end subsidies and tax breaks to the oil companies that were making record profits. I keep meaning to check and see what year the assassination attempt was made on his life.

Just a couple years ago, Chevron was permitted to use $1.6 BILLION in tax-exempt bonds to renovate a refinery in Miss. Since 2003 over $65 BILLION dollars of these bonds have been used for purposes other than the bonds were intended.

Rereading won’t help to climb out of that ideologic rut. Taxes on sales within the US should be set to US rates, which would benefit the whole country. Not just the Exxon shareholders and overpriced CEOs. Of course this is but one example of the perks a ‘poor,’ ‘fledgling’ industry demands and has been given, for the last hundred years. The market rate for taxes on oil profits is higher around the world. The market rate to pay governments for oil leases is higher everywhere else around the world. But we don’t follow the market rate here. The American taxpayer gets the shaft since we lack millions to lobby & bribe Congress into passing laws favorable to citizens, rather than the US oil and gas cartel.

Either way you look at this issue it still comes down to this; money is ALWAYS given more importance than anything else. Some of us realize that the health of our children is more important than money. Whatever poisons the food, water, and air, poisons our children, and I am sorry but no amount of prosperity justifies that. Forget the global warming/climate change issue. I am talking about measurable health dammage caused by pollution, right here right now. Every day we put off dealing with our fossil fuel addiction, we saddle our kids and their kids with cleaning up the mess. We need to make conservation a priority. We need to make the health of our children a priority. If I had to choose between a healthy economy or healthy children but not both, sorry I would kill the economy a thousand time over.

At the end of FY 2008 (Sept 30, 2008), the national debt was $10,024,724,896,912.49 Today it stands at $16,153,318,273,015.07 While I support everyone’s right to have an opinion, you don’t get to have your own facts. If you’re trying to blame that increase on Obama, you’ll have to do better. Obama didn’t get into office until January 2009, and his first budget (FY 2012) began October 1, 2009, when the national debt was already nearly $2 Trillion larger ($11,909,829,003,511.75). I started reading this article to educate myself about oil company taxes, but soo learned that this article is less about taxes that companies pay and more about the writer’s opinion of the President. If you’ want to blame Obama for our debt, at least blame the correct amount on him. Although, I’m not entirely sure it qualifies, given the utter economic collapse that almost happened. We got off easy, so far. But on one point you’re right– no amount of taxation will solve our budget problems– and neither will any amount of spending cuts. Don’t forget that the government pays a key role in the functioning of the economy, whether or not the “invisible hand” of the marketplace exists. Government deficit spending isn’t necessarily a bad thing if it can stimulate growth (or keep us out of a Depression- which it HAS, BTW) and it can keep the population safe and healthy. It’s at times like these that all companies AND individuals of all stripes should be coming together and volunteering to pay more and take less. But instead we have whiny minority groups (the Top 1%, the Upper Middle Class, the Poor) crying that it’s too hard. YES it’s hard. That’s why humankind “invented” cooperation. Sacrifice, and we will come out on top. Point fingers and complain about your individual plight and we will lose everything.

How misleading can one get? “ExxonMobil in 2011 made $27.3 billion in cash payments for income taxes. …Exxon’s tax rate was 42.9%…” But read a little more carefully and “ExxonMobil pays tax of just 13% or so on its U.S. profits. But if Exxon pays a smaller portion of its taxes in the U.S. it’s because it faces huge tax bills overseas in countries like Angola.”

13% on US Profits! Why shouldn’t they pay 40% on US profits for polluting our land, water, and air?

This is written to make the casual reader believe that Exxon pays 43% US Federal income taxes! How patriotic! They sure pay their fair share! What crap.